Tag: Collections

Wall Street Journal Reviews Weapons for Creditors in “The Battle Against Slow Payers”

The Wall Street Journal has an article that is right up my alley, “The Battle Against Slow Payers.”

The article reviews a variety of new online applications and services, such as: automated invoice dunning software; pay-in-advance invoice escrow services; and affordable business information and credit bureau searches.

While I don’t have first-hand experience with any of the vendors mentioned in the article, the collection issues that these services try to prevent are very real, and, even without using these services, small businesses should keep the underlying issues in mind at all times:

Clear, Well-Documented Invoices: Always have invoices that are clear and simple where they need to be (due date, amount owed), but have sufficient detail where necessary (project description, services provided).

Keep Track of Your Unpaid Invoices: Don’t wait until the 90 or 120 day mark to send reminders. By that time, it may be too late: either the customer no longer needs your credit/services, or you’ve fully performed your end of the deal. In collections, the squeaky wheel really does get the grease.

Get Advance Payment Where Possible: If it’s a new relationship, ask for a retainer for all or part of your services. Don’t worry about offending the new business; if it’s a legit company, they’ll understand.

Do Your Homework Before Lending Time or Money: If this economy has taught us anything, it’s that there is no obligation to lend money or sell products to unfamiliar customers. If the customer doesn’t have a track record with you, check out their business history, ask for referrals, or, if no such information exists, sell on a cash basis only. Otherwise, you’re assuming all the risk.

Doing all of the above is time-consuming and sometimes expensive, and, in the end, nothing can guarantee that all your accounts will get paid. But, if a little advance research vets just one or two of the bad apples, then it will all be worth it.

An unpaid invoice plus a collection lawyer costs far more than the services described in the article.

A Trustee’s Powers in Bankruptcy: How the Trustee can Make Money for Creditors

Everybody is asking about the efforts of Irving Picard–the Trustee in the Madoff Bankruptcy–to recover the money lost by investors. His stated goal has been to recover all of the lost investments. The question is: How? (Or, Really?)

The goal of every bankruptcy trustee is to find money or assets to sell. In most cases (probably 98% of them), there are no assets (the people are broke and they owe money against all of their property).  Of other 2%, the assets recovered fall into three categories:

  • Actual, real assets:  The debtor has money, cars, property, or anything else of value that is lien-free, meaning they own it out-right, not subject to any creditor’s claim.  This is rare; most debtors stay out of bankruptcy in order to keep their assets away from a trustee.
  • Assets resulting from avoided liens:  Upon the filing of a bankruptcy, the trustee is granted an interest in the debtor’s property, called the “hypothetical judgment lien.” If any creditor’s lien on property is defective, the trustee can attack and eliminate that lien, thus creating a “lien-free” asset. Note to Secured Creditors: This is the most common way trustees find assets. 
  • Bankruptcy Lawsuits:  This includes lawsuits to recover preferential transfers, fraudulent conveyances, and various other post-petition actions. These types of actions aren’t rare, but they generally occur in the larger bankruptcy cases.

These are the most common weapons in a trustee’s arsenal. The Madoff Trustee is claiming that the alleged Ponzi scheme constitutes fraudulent transfers to the paid investors.  If he can recover all or most of the lost investments, he will have earned his money on this one.

Patience can be Rewarded: Tennessee Judgments are Good for Ten Years

A few years ago, when borrowers still had cash or available credit, collections was an easier process–sometimes involving only a strongly worded letter or the filing of a lawsuit. Even post-judgment, collections could just be a matter of finding the bank account with all the cash or placing a lien on the rapidly appreciating real property.

In this recession, creditors need to realize that judgment collections is a process, and no longer an event.

Fortunately, Tennessee creditor lawyers have the benefit of Tenn. Code Ann. § 28-3-110, which provides that a judgment is valid for ten years and, even then, can be renewed for another ten years.

So, while you may be dealing with a debtor without any money now, keep in mind that this economy can shift for the good, as quick as it went bad. In collections, patience can lead to money.

Unpaid Invoices: To Collect or Not?

In this economy, everyone is looking to find new revenue, and this invariably leads them to that stack of old invoices and accounts receivable they never touched when they were so busy dealing with good, paying customers.

Collections attorneys are seeing more “first time” collections clients and, with those clients, are seeing the same two issues.

First, a creditor who has never sued over unpaid invoices has also probably never had its invoices scrutinized in Court. There, every aspect of the unpaid bill, down to the date, the address, and the amount owed, is nit-picked and magnified. Are your invoices and credit applications “collections ready”?

Second, customers don’t like being collected against, and successful collections can be as much “public relations” as it is legal strategy. Is the collections approach you take appropriate and representative of the way you treat customers, good or non-paying?

These are simply issues to consider and, with the right planning, you may be able to avoid expense and hassle in the process. Plus, maybe, you can turn that stack of invoices into money.